CC BY
56ECONOMIC SCIENCES
POSITIONING OF CHINESE COMPANY HUAWEI IN THE RUSSIAN MARKET
Grigan N.
Master's degree student Shanghai University, SILC Business School DOI: 10.5281/zenodo.6616393
ABSTRACT
In today's globalizing and ever-growing economy, competition between companies is constantly growing and market share is shrinking. Therefore, in order to enter new markets, companies try to create a competitive edge by positioning new products that focus on consumer behavior and perception. In this sense, the concept of "product positioning strategy" appeared, and modern companies pay great attention to this area of activity. Huawei entered the Russian market in 1996 and immediately won the trust and interest of Russian buyers. As one of the largest companies in the field of information and communication technologies, Huawei is ready to offer the Russian market a unique technological experience, joint development of hardware and software solutions, as well as the organization of joint ventures in Russia. Working on the Russian market, the company has fully felt the impact of new factors that have appeared or are growing in recent times. These are the COVID-19 coronavirus pandemic, the complication of logistical problems, the US sanctions, the global economic crisis, the ban on investments for US investors, and other factors.
The impact of these factors has significantly changed the situation in the Russian market, which, in turn, requires a correction in Huawei's strategy. Determining the direction and magnitude of the correction of the strategy, the company needs to position itself in the Russian market and assess the possibility and necessity of its implementation. This article presents the results of positioning the Chinese company Huawei in the Russian market using various positioning tools.
Keywords: Huawei company, positioning, positioning tools, Russian market of information and communication technologies, SPACE matrix.
Introduction
Creating an effective company from scratch or reorganizing an existing one always starts with its positioning in the market. Positioning is an important element of business activity. A company's position in the market largely determines its ability to attract customers. As you know, in any market there are dozens, hundreds, and sometimes thousands of companies that offer customers goods or services of approximately equal quality. This means that it is important for any company to become known, different from the many competitors operating in this market, recognizable and significant for many potential customers. Positioning is the search for such a position of the company in the market of goods or services, which will most favorably distinguish it from existing competitors.
On the one hand, in the process of positioning, the company's management can see the potential for growth in the efficiency of their business. After all, companies that do not have any competitive advantages can only attract customers with a low price of goods or services, while reducing margins and losing profits. Such companies have to make significant efforts to survive in the conditions of price competition in the market, often teetering on the verge of significant losses. On the other hand, a company that has managed to ensure the attractiveness and recognition of its products and services becomes a market leader, endearing consumers to itself. At the same time, the individuality of the market position allows such a company to occupy an almost monopoly position on the market, since there are no other companies on the market that are equal in importance to it. It has the opportunity to receive a price
premium for the uniqueness of the goods or services offered, which, in turn, leads to an increase in the margin and profit of the company. You can position companies, brands, goods and services, various properties of goods and services.
When determining its position, the company must take into account: long-term results, since obtaining or maintaining a certain position in the market requires a significant amount of time; security of results, which ensures resistance to market changes and adaptability to further development; the need to influence the mind of the client information about the proposed product or service; profitability for the consumer of the benefits of the product, obvious to the target audience; the importance of taking into account the needs of all significant categories of customers; the correlation of the advantages of their products with the advantages of the products of competing companies.
When positioning a company in the market, the following tools are most often used:
market structuring - analysis of existing ways of behavior of buyers, their preferences and perceptions. You can structure the market or its segments using Euler circles;
building a profile of companies, brands or other business elements - a comparative analysis of the studied properties of the objects of comparison, evaluated according to the current scale. The initial data for the profile is usually collected in the course of market research of the results of questionnaires and surveys;
positioning based on the similarity of brands -analysis of the similarity of brands by comparing them in pairs. The assessment of general similarity or similarity for certain properties is carried out according to
the selected metric scale, followed by the formation of a statistically significant data array and its processing by the multidimensional scaling method. The results of scaling are subjected to hierarchical cluster analysis and get a positional picture for the company's brands;
positioning by market segments - determining the positions occupied by goods or trademarks in various market segments: geographical, gender and age, ethnic, etc. If the analysis is repeated after a certain time interval several times, it is possible to take into account the dynamics of the market during positioning;
determination of the company's strategic position by the SPACE-analysis method [1], which makes it possible to form a basic positioning profile of strategic business zones by determining the parameters of the company's external and internal environment;
determination of the strategic position of the company by the method of V.S. Efremov [2]. At the same time, the strategic position of the company is determined by the degree of compliance with the business idea, macro conditions, micro conditions, market and industry conditions.
One or another instrument or a combination of them is chosen for positioning, taking into account the goal and the characteristics of the company's business.
Literature Review
Currently, a lot of research has been carried out on various aspects of positioning companies in exploited and potential markets. In the study [3], Natasha Saqib, based on a review of the current literature on product/brand positioning, concludes that there is no agreed definition of the concept of positioning, and there is no mutual agreement between scholars and practitioners regarding the exact meaning of this concept. The author offers an extended definition of positioning, covering the five main aspects of positioning (competition, vision, consumer perception, differentiation and competitive advantage). According to the author, this is the first systematic review of positioning that provides a detailed view of the current state of positioning research on a single platform, and also forms a comprehensive conceptualization of positioning.
In [4], a new typology of positioning strategies is proposed, which is tested in the process of positioning real companies. The authors suggest that expanding the system of positioning criteria with new ones (company structure, breadth of offers, degree of integration) will improve the effectiveness of the positioning strategies used.
In [5], the authors, based on the systematization of existing practices, summarized the theoretical and methodological aspects of strategic positioning, and proposed the author's interpretation of the concept of "positioning". They developed the author's algorithm for the actions of companies in the development and implementation of a positioning strategy. The algorithm takes into account the need for brand development planning and the obligation to analyze the competitive environment based on the definition of the attributes and images of competing companies.
Dorling J.R. in [6] proposed a model for the formation of a competitive position in the minds of consumers. The author suggested that this model will help
company leaders achieve a better competitive position in the market through the successful use of the components and elements that it describes.
Numerous studies are devoted to the analysis of various positioning tools, their capabilities and application features. A fairly effective tool for strategic positioning is the SPACE matrix. In [7], the authors briefly explain the essence of the SPACE method and describe its application as a strategic management tool in manufacturing companies. Developing the classical representation of the SPACE matrix, Yang Xu et al. [1] propose to move from a two-dimensional model to a three-dimensional one, adding an axis characterizing the stage of the company's development. At the same time, a quantitative analysis of indicators characterizing the state of the company under study is proposed to be carried out on the basis of the Choquet fuzzy integral method. This will allow not only to determine the company's position in the market, but also to calculate a promising path for its development. In [8], the authors propose to eliminate some limitations in the application of the SPACE matrix (the use of binary logic and clear expert estimates) by using the concept of fuzzy logic. Another effective method of positioning a company in the market is the method of determining the strategic position of the business, proposed by V.S. Efremov [2, 9]. The method allows, based on the analysis of strategic conditions (micro, macro, industry and market), to calculate the coordinates of the company's strategic positions and their characteristics, to determine strategic targets and organizational strategies.
Main Body
To determine the need and direction for correcting Huawei's strategy in Russia, we will apply the most well-proven methods of SPACE analysis and the method of V. Efremov.
To identify areas for correcting Huawei's strategy in the Russian market, we will conduct a comparative assessment of its strategic position in the global information and communication technology market and the company's position in the Russian market. Differences in the considered strategic provisions will allow to identify weaknesses in the company's strategy in the Russian market and determine the main directions for correcting Huawei's strategy.
As a basic method for determining the strategic position of Huawei, we will choose SPACE analysis. It allows you to evaluate the main competitive advantages of the company (CA) and its financial position (FS), as well as the stability of the environment (ES) and the attractiveness of the industry (IS) to which the company under study belongs. The first two factors characterize the internal environment of the company, and the last two characterize the external environment in which the company under study operates.
To determine the strategic position of Huawei in the global market, we use the initial data presented in [10]. The paper identifies the main factors that determine the strategic position of the company and the values of expert assessments of these factors, presented in Table 1.
Table 1
Values of Factors Determining Huawei's Strategic Position [10]
Factor name Value Factor name Value
Internal strategy position External strategy position
Financial strength FS Environmental stability ES
Earnings per share +3 Price of competitive product -1
Revenue increase +5 Competitive pressure -4
Return on assets +4 Global economic -4
Leverage +4 Technology changes -3
Lequidity +3 Elasticity of demand -3
Cash flows +3 Barriers to market entry -3
Mean +3,67 -3,0
Factors characterizing the company's competitive advantage, CA Factors characterizing the attractiveness of the industry, IS
Market share -3 Growth potential +5
Product quality -4 Potential profitability +4
Life cycle stage -2 Financial stability +4
Consumer commitment -2 Resource usage +3
Technological know-how -4 Capital intensity +4
Use of production facilities from competitors -3 Ease of entering the market +3
Mean -3,0 Mean +3,83
The SPACE matrix built according to the initial data (Fig. 1.) shows [11-13] that Huawei takes an aggressive position in the global market of information and communication technologies.
An aggressive position is characteristic of an attractive industry with fairly stable industry economic conditions. The financial capabilities of an organization in such a position usually make it possible to ensure its competitive advantage in the market. An organization
that occupies such a position can also make full use of its capabilities not only in its own, but also in related industries, increase its occupied market segment and / or allocate resources to products that have a certain competitive advantage. The decisive factor for such organizations is the emergence of new competitive companies on the market.
Let's evaluate the strategic position of Huawei in the Russian market.
FS
6
/ \ 3 ,61 s
/ / X \
y / :
3,0 / 0 ,61 \ V ,83
-6 -4 -2 t\ 0, V 83 2 4
\ /
\
3,0
4
ES
Fig 1. Huawei SPACE Analysis Matrix
To determine the values of the factors characterizing the company's strategic position, an expert survey was conducted in the course of the study of students of the Presidential Management Training Program for Organizations of the National Economy of the Russian Federation. The survey involved 118 people - top managers, marketers and financiers of leading companies in Rostov-on-Don and Moscow. For the examination, a questionnaire was developed that allows evaluating the company's activities. To ensure the objectivity of the
survey results, the experts were provided with the necessary information characterizing the work of Huawei in the Russian market. Expert information was processed using standard expert analysis procedures, which made it possible to determine the values of: collective estimates of factor parameters, variance and coefficient of variation. The values of the coefficients of variation showed the consistency of expert opinions. The results of the examination are shown in table 2.
Table 2
Values of Factors Determining Huawei's Strategic Position in Russia_
Factor name Quantitative value
1 2 3 4 5 6
Internal factors
Factors characterizing the financial stability of the company, FS
Return on investment (ROI) *
Financial leverage *
Liquidity *
Degree of satisfaction of capital requirements *
The flow of payments to the company *
Ease of exiting the market *
Business riskiness *
Inventory turnover *
Mean 3,5
Factors characterizing the competitive advantage of the company, CA
Market share *
Product quality *
Life cycle stage *
Product replacement cycle *
Consumer commitment *
Technological know-how *
Use of production facilities from competitors *
Degree of vertical integration *
Mean 2,75
External factors
Factors characterizing the stability of the environment, ES
Technological changes *
Inflation rate *
Demand variation *
Variation in prices of competing products *
Barriers to market entry *
Competitor pressure *
Elasticity of demand *
Mean 2,7
Factors characterizing the attractiveness of the industry, IS
Growth potential *
Potential Profitability *
Financial stability *
Technological know-how *
Resource usage *
Capital intensity *
Ease of entering the market *
Resource Efficiency *
Mean 4,25
Figure 2 shows Huawei's strategic position in the Russian market. As can be seen from the figure, Huawei also takes an aggressive position in the Russian market of information and communication technologies.
FS
CA
6
/ \ 3 ,5
/ N \ jm k h -
/ 2
2,7 5 / t 0,8 1 1 1 \ 4, 25
-6 4 \ 3 a n ai 1
\ \ 03
\ /H
2,7
-4
IS
ES
Fig. 2. SPACE matrix of Huawei analysis in the Russian market
Comparison of Huawei's strategic positions in the global and Russian markets (Fig. 3) shows that the company poorly takes into account the specifics of the Russian market (sanction pressure, destroyed previously established economic ties with other states, financial risks, logistics difficulties, changed competitive sit-
uation and etc.) and does not fully use its strategic potential. As a result, Huawei's strategic position in Russia is somewhat weaker than its position in the world. This leads to the need to correct Huawei's strategy in the Russian market in order to bring the company's strategic positions in the global and Russian markets as close as possible.
Fig.3. Huawei's strategic position in the global (S) and Russian (S1) markets
Having considered the results of the company's positioning in the Russian market using the SPACE analysis method, we will evaluate the situation using the method proposed by V.S. Efremov. The method allows not only positioning Huawei in the market, but also choosing a company development strategy based on the positioning results. In accordance with study [2], the strategic position of the company is determined by the degree of compliance with the business idea, macro conditions, micro conditions, market conditions and industry conditions.
The macro conditions in which the implementation of the company's strategy takes place, the author proposed to include: social conditions; political conditions; economic conditions; technological conditions. To assess macro conditions, it is advisable to use the results of the PEST analysis of the company.
The microconditions of the strategy are determined by the following systems of organization: production and technological system; financial and economic system; control system; system of production preparation and marketing; corporate culture system. Microconditions characterize the internal environment of the company and for their evaluation, one can use the results of SWOT analysis.
Industry conditions for the implementation of the company's strategy are formed under the influence of:
the structure and dynamics of the competitive environment of the industry; threats of potential competition; position of buyers in the industry; position of suppliers in the industry; pressure from manufacturers of substitute products. To assess industry conditions, one can use the results of Porter's competitive analysis.
Market conditions for the implementation of the strategy depend on: the potential (size) of the market; market structure and potential segment of the business idea; market age; elasticity of demand; key success factors in the market. To assess market conditions, one can use the data of the BCG and GE matrices.
To determine the strategic position of Huawei in the Russian market according to the method of V.S. Efremov, the expert group described earlier was interviewed as part of the study. For evaluation, the scale of qualitative assessments described in study [2] was used. Processing of the results of the examination was carried out using the program "Expert", integrated into Microsoft Excel.
The positioning results are presented in Table 3.
The coordinates of the strategic position occupied by Huawei are determined by calculation. The coordinates of the center of the rectangular search area for the strategic position (C), through which the vector that determines the strategic position of the company passes, are calculated by the formulas:
Table 3
Values of Factors Determining Huawei's Strategic Position in Russia_
Factor name Quantitative value
1 2 3 4 5 6 7 8 9
Factors characterizing macro conditions
Social conditions *
Political conditions *
Economic conditions *
Technological conditions *
Mean 4,75
Factors characterizing microconditions
Production and technological system *
Financial and economic system *
Control system *
Pre-Production and Marketing System *
Corporate culture system *
Mean 5,0
Factors characterizing industry conditions
Structure and dynamics of the competitive environment of the industry *
Threats of potential competition *
Position of buyers in the industry *
Position of suppliers in the industry *
Pressure from manufacturers of substitute products *
Mean 5,8
Factors characterizing market conditions
Potential (size) of the market *
The structure of the market and the potential segment of the business idea *
Market age *
Elasticity of demand *
Key success factors in the market *
Mean 4,8
y _ ymic+(ymac-9) _ 5-4,25 _ Q gg
(1)
22 Xic + (xmc - 9) 5,8 - 4,2 xr =---=---= 0,8 (2)
2
2
ymac is the average value of the variable "macroenvironment";
xic is the average value of the variable "industry conditions";
. . Xmc - the average value of the variable "market
The following notations are introduced in the for-
conditions".
mulas:
yc is the coordinate of the center C along the Y
axis;
Xc is the coordinate of the center C along the X
axis;
ymic - the average value of the variable "microenvironment";
In accordance with [2], the coordinates of the company's strategic position (SP) are defined as follows:
since | Xc | > | yc | and Xc > 0; yc > 0, then Xsp = Xic;
_ yc ■ xsp ysP xc '
then ysp = 2,76; Xsp = 5,8.
According to the calculations, Huawei's strategic position is shown in Fig 4.
Micro conditions
s o
■S
o o
+9 '
+8
+7
+6 / C
V +5 / / S" >
+4 / 4 ✓ /
N » N +3 ✓ s
» +2 / ✓
+ 1 " . /
■9 ■8 ■7 ■6 ■5 ■4 ■3 ■2 -1 - +2 +3 +4 +5 +6 +7 +8 +9*
S -2 s N
y ✓ -3
* -4 N N
y -5 N N
-6
-7
-8
-9 ,
a
.g
1 o o
1
Macro conditions Fïg. Coordinates of Huawei's strategic positions in the Russian market
In study [2], it was proposed to divide the space of strategic positions into 36 areas. The space is formed taking into account the fact that in each such area there is a relative equality of business conditions, missions and strategic alternatives. Each of the 36 areas of strategic positions characterizes a certain position of the company under study in the market, and it is given some conditional definition (name) that expresses its essence. In addition, the space of strategic positions is divided into 4 quadrants, which correspond to aggressive, competitive, conservative and defensive positions. When moving from one quadrant to another, there is a
radical change in the nature of the organization's behavior.
In accordance with the above, Huawei in the Russian market takes an aggressive strategic position "Investigator". Companies of this type do business in a fairly attractive industry and are characterized by good competitive advantages. But they either have insufficient strategic potential, or the macro environment in which they operate is not entirely favorable [2].
Depending on the positions occupied in the strategic space, the company implements a certain set of behavior in relation to its business, shown in Figure 5.
Macro condition Fig. 5. Ways of company behavior in the strategic space
It can be seen from the figure that selective growth is an effective way of Huawei's behavior in the Russian market. At the same time, the company should concentrate its efforts in those market segments where its competitive advantages are obvious.
In his work, V.S. Efremov proposed a procedure for choosing strategic alternatives that would allow the
company to either reach a higher level of development, or consolidate and protect its leadership in the market. To do this, the entire space of strategic positions is divided into 9 areas (A, B, ... K) and for each area its own setting (strategy) for the development of the company's business is proposed. The strategic position of Huawei in the Russian market corresponds to area F (Fig. 6).
A
D
G
B
Q
E
H
C 0
F
■O-
K
1 direct integration 1 reverse integration
» market development » product development » joint ventures
Fig 6. Typical business unit strategies
This area is characterized by a focus on selective business growth. At the same time, the company's strategy will directly depend on the goals facing it. If a company wants to take a place in the group of market leaders (area C), then the goal can be achieved through market development, product development, as well as through the creation of joint ventures, which can significantly expand the range and improve the quality of goods. If a company plans to achieve rapid capitalization of competitive advantages associated with its position in the industry and in the market (area B), then the most effective ways to achieve these goals can be forward and backward integration.
Conclusion
Studies have shown that when positioning a company on the market, the SPACE-analysis method, which allows you to form a basic positioning profile for strategic business areas, and the method proposed by V.S. Efremov, which allows not only to carry out positioning, but also to choose a strategy for the development of the company, based on the results of positioning.
To identify directions for correcting Huawei's strategy in the Russian market, a comparative assessment of its strategic position in the global information and communication technology market and the company's position in the Russian market was carried out. Differences in the considered strategic provisions will allow to identify weaknesses in the company's strategy in the Russian market and determine the main directions for correcting Huawei's strategy.
Comparison of Huawei's strategic positions in the global and Russian markets showed that the company poorly takes into account the specifics of the Russian market (sanction pressure, destroyed previously established economic ties with other states, financial risks, logistics difficulties, the changed competitive situation, etc.) and does not makes full use of its strategic potential. As a result, Huawei's strategic position in Russia is somewhat weaker than its position in the world. This means that it is necessary to correct Huawei's strategy in the Russian market in order to bring the company's strategic positions in the global and Russian markets as close as possible.
Studies have shown that selective growth is an effective way of Huawei's behavior in the Russian market. At the same time, the company should concentrate its efforts in those market segments where its competitive advantages are obvious.
It has been established that Huawei in the Russian market occupies an aggressive strategic position "Investigator". At the same time, the company's strategy directly depends on the goals facing it. If a company wants to take a place in the group of market leaders, then the goal can be achieved through market development, product development, as well as through the creation of joint ventures that can significantly expand the range and improve the quality of goods. If a company plans to quickly capitalize on the competitive advantages associated with its position in the industry and
in the market, then forward and backward integration may be the most effective ways to achieve these goals.
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